A fairly hectic consultation meeting happened yesterday at TANGEDCO (TNEB) for bidding for 1000 MW of solar projects in TN.

Crowd was amazing, something along the lines of what one would have expected at a top-line movie premiere (sans the pretty women, it was a men’s show alright). Such was the crowd that the hospitable folks at TANGEDCO had to arrange for two sessions instead of one, as originally planned.

5. A rather interesting way to bid. You bid for a price that will be increased by 5% every (compounded) year until the 10th year. The price will remain the same as the 10th year price for years 11-20.

Everyone bids, and based on the lowest bid price, TANGEDCO will fix a common price for all allottees.

(A bit confusing over here on what that actual price will be – will it be the lowest price or an average? Also, the exact process of allotment is not clear, will it be a 2-step process, if TANGEDCO fixes the price based on first bids? Isn’t there a chance that I would like to back out if the price TANGEDCO fixes after the bids were submitted is lower than what I had bid for and I don’t wish to go lower? How does this process accommodate this?)

An update on bid prices & process: I understand that the way it is planned is as follows. All the prospects bid. Based on the lowest bid (L1), TANGEDCO asks all (other than the lowest bidder presumably) to match L1. Whoever matches will be allotted. This is the intended process. Of course, there are complexities here. What happens if not enough people are willing to match L1? What happens if too many people (beyond 1000 MW) are willing to match L1? TANGEDCO has prepared answers for these questions, from what I understand. Perhaps they will clarify all these in the pre-bid meeting.

6. Payment security through a revolving Letter of Credit (this should bring a sigh of relief from most folks alleviating revenue uncertainty)

7. TANGEDCO will ensure that evacuation facilities are not a problem – in fact, he read out the additional capacities available in each TN district and it came to 1110 MW, so I presume that is the math they are working with. (Those who wish to know the evacuation capacities available in the various districts can get these data from Chief Engineer, Non Conventional Sources, TANGEDCO)

8. Minimum net worth for bidder – 1 Cr/MW

9. Identifying land and putting up a dedicated feeder line are the responsibilities of the developer. TANGEDCO can put up the dedicated line, but the cost is to the developer.

10. There will be a pre-bid meeting soon after the tender is released.

OK, the above were the salient points.

A picture of the audience for one of the two sessions for the consultation meeting – overflowing interest?

Other points of interest

Timelines

Release of Tender Bid Document – Day 0 – Time A (0 from start)

Submission of Bids – Day 30 – Time B (30 from start)

Qualification of Eligible Bidders and LoI – Time C = Time B + 30 days (60 from start)

Financial Closure – Time E = Time D + 30 (120 days from start, 60 days from LoI)

Project Completion – Time F = Time E + 240 (360 days from start, so you get 8 months for implementation)

SPO Solar Tariff and Its Relation to Bid Price

What will be the solar tariff for all those wishing to buy solar power from TANGEDCO to meet their SPO? This price will be determined, by the TNERC, based on the final contract price offered by TANGEDCO (which in turn will depend on the bid prices) and to this will be added transmission charges and other applicable costs to arrive at a final solar tariff.

Division of responsibilities between TANGEDCO & TEDA

TANGEDCO will do the following:

Signing of PPA (buying and paying for the power)

Ensure payment to generators through Letter of Credit

Provide evacuation infrastructure

Undertake load flow studies

Rest will be taken care of by TEDA.

Some key questions/concerns I and some others had in mind

Lack of upper limit – doesn’t sound like a great idea – seems to go against the spirit of ensuring that a large number of aspirants participate

One price for all – this is different from the reverse bidding seen in other states, where I get the price I bid for. Thus, not sure how exactly the process will work.

Net worth requirement – The net worth requirement mentioned was Rs 1 crore/MW, quite liberal in my opinion (most other states have specified Rs 3 crore/MW as the requirement), something that wouldn’t sit well with lenders. While this does encourage participation from a wider range of investors, it increases the risk for the lender as parties with much lower creditworthiness could be applying for loans. This feeling of insecurity among lenders is something that the sector could do without at this point, since securing debt financing is hardly a walk in the park. One might argue that this should not matter for pure project financing, as then only the merits of the project, and not that of the lender, is critical for repayment-worthiness. But from what we have seen, there have not been too many cases of pure project finance (without recourse) in renewable energy projects.

Other than these, the powers-that-be appear to have thought things out quite well. It was nice to see them addressing the key pain points very well, viz

Payment security

Evacuation concerns

Transparency of the entire process

But they surely had not thought out one point – the crowd that would gather for this. They had estimated 100, it would have been more like 400. Sign of things to come?

Wish to comment or have questions?

Do you have questions on this? Please drop these in the comments. I will make sure I will consolidate them and send it to TANGEDCO & TEDA. No, I don’t work for TEDA or TANGEDCO, but I presume they might prefer if someone consolidates and sends all the questions. So, let’s say this is only an attempt at being nice

It was clearly mentioned that all issues on land would be the responsibility of the developer. While TNEB/TANGEDCO will help in put up the feeder lines to the substation (at developer’s cost), the state utility will have no role to play in identification or acquisition of land

Yesterday the 23 rd nov 2012 i attented the investers meeting organised (Dis organised) by TEDA at TNEB Head Qtrs at 4.30 pm.

The way in which it was conducted, i believe that small solar power generators/investors cannot think of the solar plant. Reverse bidding, financing, evacuation facilities available are all not encouraging us to invest.

It may be viable for big players like Reliance, Tata Power etc.,

In general the TN Govt Solar Policy is nothing but a GIMMICK. No one in TNEB is bothered about the problems faced by ordinary people, small scale industries etc.,

WE HAVE TO APPRECIATE THE POLICY DRAWN BY GUJARAT GOVT.

”

I would not be so pessimistic as the comment above says. No, I would not compare it with a gimmick, there has been a good amount of thought that has gone into this, we might not agree with the structure, that is a different issue. Yes, we are taking some of the announcements at face value – for instance, the claim that TANGEDCO will provide adequate evacuation facilities – but I think they had done some studies to back up their claims.

One real concern we have at EAI is that the way it is structured (with no upper limit combined with reverse bidding), it could easily become an exclusive big boys playground. Obviously, I can quote a lower bid at higher scales become of economies of scale. That is, a Reliance could afford to quote even Rs 5 per kWh at 200 MW bid size, but that bid price surely would not be possible for a small company quoting for 1 MW.

Lack of upper limit is such an obvious gaffe that I am surprised TEDA/TANGEDCO has not thought about it.

I understand that those entreprueners who have put up wind facilities are complaining that the power evacuation record by TNEB is dismal becase of lack of infrastructure and
all their investments and pay back calculations have gone awry.

Even after so many years of experience with wind power and significant increase in wind capacity over the years , TNEB does not seem to have come out with a good solution

WIth the current state of affairs like this, now TN govt / TNEB wants 1000MW solar facilities to be put up in 365 days and the big question is that how reliable is the data
provided by TNEB on the power evacuation infrastructure available at various
districts.

I am sure those who ever puts their money would have to seek convincing answers
!!

What is the real situation?
”

I think this is an excellent question, something many of us familiar with wind would have asked too.

While I cannot vouch for TNEB data, I think there could be differences between wind power plants and solar.

Two differences could lend credibility to TANGEDCO assertions:

1. Wind zones are available only in a few pockets and some of these pockets were indeed not close to substations and available power evacuation facilities. Solar zones on the other hand will be far more widespread, thus the likelihood of substations with capacity available nearby are much higher
2. Most wind farms until now in TN were put up to take accelerated depreciation benefit, and the owners really did not bother too much about how well the power would be evacuated to maximize output – as a result, I heard that many of them simply did not do proper load flow studies. In fact, you will be find many wind farm owners not even having visited their wind farms once, it was something only their accounting departments knew about. The evacuation problem hence was partly created by the developers themselves. Solar, on the other hand is incentivised based on generation and one could hence expect developers to put up power plants based on evacuation facility and not the other way round (as it happened in many cases with wind)

TANGEDCO says they have 1100 MW surplus evacuation facility available, and they have the numbers to back it up. They are also willing to share the numbers. Why should we assume they are exaggerating? I am not a strong believer in governments either, but then, these guys are willing to openly discuss pain points and are saying they have solutions. Guess we should give them the benefit of doubt, at least for now.

I wish to know, if the developers are free to use the type of technology to extract solar energy or any restriction to use a particular technology say Mono panels only.?
Further, can you provide the data about the clear sunny days per location offered.?
What would happen if the agency do not make payment, as already in case of wind farms. will the developer be free to sell it’s power to other sources.?

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